There is one thing that all VCs totally kick ass at and that is giving unsolicited advice to entrepreneurs on how to run their business.
Kidding (or not) aside, this can be done really well and is actually a meaningful part of being a good VC – sharing relevant learnings to give entrepreneurs you work with some sort of competitive advantage.
Unfortunately in my experience this is the minority of situations in which advice is doled out.
When founder shares with me advice they’ve received from VCs and what I think of it I give them a simple framework:
- Best Advice: Comes from a VC that has deep context of your specific situation (i.e, is actually invested in your company or about to be) and the advice is rooted in data/direct relevant experience of the VC at some sort of scale.
- OK Advice: One attribute is missing from the above. It either comes from a VC that has great context of the situation (i.e., is invested) but there isn’t a lot of data/experience backing it up or it comes from a VC that doesn’t have great context of the situation (i.e., is not invested) but happens to have strong data/experience that they are basing their advice on.
- The Absolute Worst Advice: Comes from a VC that has zero context of your situation. They aren’t invested and are far from coming close to it. In fact, its probably your first interaction with them. They are trying to make an impression on you and are saying things with no basis of data or experience whatsoever.
Its the absolute worst advice piece I want to park on for a minute because I’m seeing it way too much lately…
It’s hard for founders to understand why VCs would give advice like this.
They are doing it because it is 100% in their best interest. Rather than give advice that might be meaningful to your company they are giving you advice that increases the small odds that your business one day lands in their investment strategy.
To help illustrate the point, here are a few real examples I’ve heard from founders just in the last month that might sound eerily familiar to you:
- VC tells startup with $50,000 of MRR growing 5% MoM, which is not fast enough for the VCs investment strategy, that they should make their product free to get more users and higher growth. Never mind the fact that the company is bootstrapped with only $25,000 in the bank. Lets just tell that founder to give their business an almost guaranteed death sentence for the .0001% chance a freemium takes off and they start growing fast enough for you. Lovely.
- VC that writes $15M checks tells startup with $15,000 of MRR that if they are going to raise they should just go raise $5M instead of $1M-$2M to really ‘go for it’. Never mind the fact the company has no shot getting that deal done. Lets just tell that founder to waste months of their life for the .0001% chance they get it done and might get to a $15M check size for you sooner. Fantastic.
- VC tells startup they need to move to Silicon Valley to raise money. Never mind the fact that the VC won’t produce a term sheet before they do it. Lets just tell them to move their family across the country to increase their odds of getting a next step with you. Sounds great, see you soon.
If you’re on the receiving end of statements like this from VCs that don’t have deep context of your situation (i.e. are not invested) and it isn’t based on data/relevant experience I’d encourage you to block the entire conversation from your memory.
The point here isn’t to complain about VCs or deem them untrustworthy. Many have built stellar reputations guiding companies they work with through hard times based on their prior experiences.
The point is to remind founders that only those with a vested interest in you and your business have the privilege of giving you advice. Co-founders, team members, spouses, advisors, mentors, customers, invested VCs.
Not someone who you’ll never hear from again after they hang up the phone.
get in touch: Arthur Ventures; firstname.lastname@example.org